💎Markets continues to recover 💎

🏀A comeback we need🪜

Equity market rosed for a second session, trying to end a disappointing month with a positive vibe. Technology stocks roared on the front as Nasdaq climbed by about 3.4%. This helps pull the index out of a correction for the month, which is down 9%. 

The S&P 500 is also struggling to climb out of the hole as it rose 1.9%. Yet, for the month, it dived 5.3%. This is the worst month for January since 2009, when the index had fallen 8.6%.

The Dow also cheered and held gain for the day at 1.2%. Monthly loss is milder at 3.3%. Comparatively, it is still the worst January since 2016, when Dow dived 5.1%. 

🧨Volatility remains🥊

Intraday swings for the past week had nothing short of a roller coaster, with investors grappling with the possible onset of a March rate hike and elevated possibility pace of monetary tightening through rate increases and balance sheet runoff. 

The short term 2 year treasury yield had risen as high as 1.21%, higher than the pandemic, before moderating back to 1.18%. The rate is crucial since the yield typically signals the market forecast of the level of short term interest rate for the next few years. As such rate rises, it means market participants are expecting a more robust rate increase from the Fed. 

🎢Deeply oversold?💵

Pika World believes there is still a potential downside to the equity market. Thus, our options strategy had limited our potential recovery gain from key portfolio holdings such as Tesla. As a result, we wind down some positions but will continue to hold a portion for a long-term investment. 

Bad news would be fully reflected in the market at some points, and that’s possibly what was seen on Monday. And, as losses become less pronounced, the index can charge higher as they recover from the recent low level with buyers appearing. 

For example, the S&P 500 is now rotating back to its 200-day moving average, which could signal that investors have better assessed the Fed-induced risks, which might not be too large to derail the current bull market cycle. 

Another side could be the stocks that are hit the hardest and see firmer recovery. For example, the Russell 2000 index fell by about 22% from its Nov peak, which is worse than the S&P 500 performance. 

Cheers,

Pika Nat.